U.S. Department of Labor v. Harris, No. 16-6024 (8th Cir. 2017)
Annotate this CaseThe bankruptcy court granted summary judgment for the Department of Labor and declared that debtor's debt is nondischargeable under 11 U.S.C. 523(a)(4). Debtor appeals. The Department had obtained a pre-bankruptcy judgment against debtor in district court. The district court found that, under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq., that debtor breached his fiduciary duty when the company of which he was CEO failed to remit funds withheld from its employees' paychecks for their health insurance plan. The BAP concluded that a trust res was created in this case because the trust was created when the employer withholds wages for payments to a plan providing benefits to employees; debtor had fiduciary responsibilities with respect to funds that had been withheld from wages for payment to HealthPartners; and debtor committed defalcation when he knowingly failed to remit employee contributions and instead knowingly used those funds to pay for other corporate expenses. Accordingly, the BAP affirmed the judgment.
Court Description: Federman, Author, with Saladino and Nail, Bankruptcy Judges] Bankruptcy Appellate Panel. The bankruptcy court did not err in finding debtor's debt to the U.S. Department of Labor based on a pre-bankruptcy judgment in federal court which found, under ERISA, that debtor breached his fiduciary duty when the company of which he was CEO failed to remit funds withheld from its employee's paychecks for their health insurance plan; the premiums had been held in trust by the employer, debtor was the fiduciary of the trust within the meaning of 11 U.S.C. Sec. 523(a)(4), and his decision not to remit the withheld wages was a defalcation within the meaning of the statute. [ January 05, 2017
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